Fake Emiratisation cases- a review of the penalties and outcomes
Dispute Resolution / UAE
The United Arab Emirates (UAE) government has undertaken substantial efforts to augment the participation of Emirati nationals in the private sector.
Law Update: Issue 363 - Energy, Utilities, Mining and COP 28
Ammar AlKaabiAssociate,Dispute Resolution
In recent years, the United Arab Emirates (UAE) government has undertaken substantial efforts to augment the participation of Emirati nationals in the private sector. Noteworthy in this regard is the "Nafis" program launched in September 2021, which orchestrated a comprehensive framework aimed at bolstering the competitive efficiency of national cadres. Despite these commendable strides, the menace of Fake Emiratisation threatens to undermine the initiative's objectives. This article sheds light on the legal ramifications of this phenomenon, delineating the regulatory landscape and suggesting avenues for mitigation through legal settlements.
UAE government enacted Federal Law No. (27) of 2021, Facilitating the Establishment of the UAE Cadre Competitiveness Council "Nafis". This council is entrusted with devising and overseeing policies pertinent to training and assimilating Emirati individuals in various economic sectors. The intricacies of regulatory compliance concerning Emiratisation are delineated in several legislative documents. And The Ministerial Resolution No. 279 of 2022, Monitoring Mechanisms of Emirarisation Rates in the Private Sector & Contributions Imposed on Non-Compliant Establishments, therefore mandates companies with a workforce exceeding fifty individuals to employ at least one Emirati national (for every fifty Non-Emirati workers in the company, there must be one Emirati worker), thereby instituting a proportionality requirement between Emirati and non-Emirati workers.
Decree-Law No. (33) of 2021 on Labor Relations further accentuates the employer’s obligation to facilitate genuine employment opportunities, failing which they could be implicated in Fake Emiratisation practices. Regrettably, some entities have endeavored to exploit the initiative through Fake Emiratisation, thereby incurring legal repercussions, which include hefty fines and referrals to public prosecution.
Understanding the regulatory landscape in the UAE requires a clear definition of the term "Fake Emiratisation." At its core, "Fake Emiratisation" refers to deceptive practices adopted by certain establishments. These establishments misleadingly register UAE nationals in fictitious or non-functional roles, creating an illusion that they are meeting the mandated Emiratisation targets set by the government. This deceptive approach serves a dual purpose. Firstly, it paints a distorted picture of the actual progress and state of Emiratisation, making it appear as though more UAE nationals are employed in meaningful roles than is genuinely the case. Secondly, by feigning compliance with these targets, these establishments can unjustly benefit from various governmental incentives and rewards that are meant to encourage genuine Emiratisation. Such practices not only undermine the spirit and objectives of the Emiratisation policy but also deprive deserving UAE nationals of genuine employment opportunities.
A recent report from Al Khaleej Times highlighted the severity of this issue. The Ministry of Human Resources and Emiratisation (MOHRE) identified 565 companies that falsely hired 824 UAE nationals in fake roles since mid-last year. These companies now face legal and administrative actions, including fines ranging from AED 20,000 to AED 100,000 and potential referrals to the Public Prosecution.
Fake Emiratisation occurs when a UAE national is employed without real tasks or when rehired in the same establishment to manipulate data. Such companies face penalties and downgrades within MOHRE's classification system, leading to higher service fees.
On a positive note, over 17,000 genuine private establishments employ more than 81,000 Emiratis, the highest number ever. MOHRE commends these establishments and encourages the public to report any violations.
In case there is an agreement between the company and the Emirati workers to that end, the situation becomes exploitation of public funds by benefitting from the government's Emiratisation competitiveness support program without having a real employment relationship between the company and the Emirati worker. Given that the funds of the competitiveness program are considered public funds, for which the ways, purposes, and conditions for disbursement have been specified, the company is therefore considered in violation of the provisions of the following articles:
1- Article (63) of the Decree-Law No. (33) of 2021 regarding the Regulation of Labor Relations, which stipulates: " Any person, who violates any other provision on this Decree- Law, its Implementing Regulation and the resolutions issued for its implementation, shall be punished with a fine of not less than (AED 5,000) five thousand UAE Dirham and not more than (AED 1,000,000) one million UAE Dirham."
Paragraph (1) of Article 2 of the Cabinet Resolution No. 95 of 2022 regarding the Violations and Administrative Penalties associated with the initiatives and programs of the UAE National Workforce Competitiveness Council, which stipulates: " In the event that the establishment falsifies the Emiratization percentage of "Nafis" initiatives and programs. An administrative fine of not less than (20,000) twenty thousand dirhams and not more than (100,000) one hundred thousand dirhams per employee."
Paragraph (2) of Article 2 of the Cabinet Resolution No. 95 of 2022, which stipulates: "Providing inaccurate information or documents in order to obtain benefits related to "Nafis", or to evade or circumvent the Emiratisation process, An administrative fine of not less than (20,000) twenty thousand dirhams and not more than (100,000) one hundred thousand dirhams per case. Terminating the support and refunding all amounts spent" If it is proven that the company submitted documents for the issuance of permits and formal employment contracts without complying with the elements of the contractual relationship between the parties, it shall be referred to the public prosecution.
Paragraph (7) of Article 5 of the Cabinet Resolution No. 95 of 2022, which stipulates: " It is not limited to the imposition of fines and penalties stipulated in this Resolution. The Public Prosecution may take legal action against either or both of the establishments and beneficiaries for legal action."
2- Article (26) of the Decree-Law No. (33) of 2021 regarding the Regulation of Labor Relations stipulates: " The wage is paid in exchange for work and the employer shall allow the worker to carry out his work. Otherwise, it shall be obliged to pay the wage agreed upon."
3- Article (60) of the Decree-Law No. (33) of 2021 regarding the Regulation of Labor Relations stipulates: "Any person who commits the following shall be punished by a fine of not less than (AED 50,000) fifty thousand UAE Dirham and not more than (AED 200,000) two hundred thousand UAE Dirham: Using work permits for purposes other than those for which they were issued…".
Fortunately, the legal architecture permits settlements in cases of Fake Emiratisation violations, averting protracted court trials. The recently promulgated Decree-Law No. (38) of 2022 concerning criminal procedures delineates the modalities for such settlements. Drawing from our experiential knowledge, we highlight a case where negotiations with the public prosecution led to the revocation of a million-dirham fine, illustrating the potential avenues for legal reconciliation.
Whereby Public Prosecution called upon the director of a company over allegations of Fake Emiratisation. The company was accused of illicitly obtaining financial benefits from the Ministry of Human Resources and Emiratisation by deceitfully employing numerous Emiratis without assigning them genuine tasks. This act of deception prompted the Ministry to mistakenly award the company with benefits, including significant government deductions for transaction fees. However, after engaging in discussions with the Public Prosecution, the company's one million dirham fine was rescinded on the condition that they return the improperly gained benefits. This case serves as a testament to the effective legal mechanisms in place and the possibilities for resolution in such matters.
The issue of Fake Emiratisation poses not only a legal quandary but also threatens the economic sanctity of the Emiratisation initiative. Companies and individuals alike stand to face substantial repercussions, invoking the necessity for adherence to the regulatory norms. Looking ahead, it is incumbent upon all stakeholders to foster a culture of compliance, ensuring the genuine realization of the Emiratisation objectives, thus contributing meaningfully to the nation’s developmental trajectory. It is imperative that a proactive approach be adopted, one that is rooted in ethical employment practices and adherence to the law, to curb the menace of Fake Emiratisation effectively.
For further information,please contact Ammar Alkaabi.
Published in November 2023
